What are Lines of Credit Loans?
Persons in need of loan funds might be confused over the different borrowing options available. Personal loans, collateral loans, title loans, and payday loans are a few of the various options available. Another option is a line of credit loan. In some ways, a line of credit is similar to a credit card as both reflect “revolving credit.” That is, the loan comes with a borrowing limit. You can draw money from the loan up to the limit. When you make payments on the loan, the available credit amount opens up as the balance drops.
That is, if your current limit is $1,000 and you make payments that lower your balance to $500, you can access the remaining $500 in credit. Revolving credit is different from a fixed loan such as a personal one. With a personal loan, you cannot borrow again on the same credit.
Why would someone want a line of credit account? A line of credit could cover any expense when the borrower requires cash. For many borrowers, a line of credit loan online may help when a need arises for emergency funds. Putting fuel in a car, paying for home repairs, and purchasing medicine are three examples of emergency spending.
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How to Apply for a Line of Credit Loan
To know what a line of credit tells a borrower what to expect. After learning about the loan, the would-be borrower could decide whether this type of loan is the right one for a particular situation. If so, like any other loan, filling out and submitting an application becomes mandatory when seeking a line of credit loan estimate.
Don’t fret. The process isn’t complicated.
An online loan application allows borrowers to fill out forms right on the company website. Applicants won’t struggle through filling out a long-form application with blue and black ink. Applicants can provide necessary information in the designated sections on the online form. Afterward, hitting the submit button sends the information through.
Basic information required to process the application includes:
- Name
- Address
- Phone Number
- Zip Code
Other information necessary to process the application includes items specific to the financial situation of the applicant. The applicant does need proof of a steady source of income. The applicant must be in a position to pay back the money he/she borrows. Steady income establishes confidence the borrower can do so.
If approved for a loan, the funds must go into a checking account. So, the borrower must possess an active account. Also, applicants must be 18 years old and either a U.S. citizen or lawful permanent resident.
After receiving and reviewing the application, a loan specialist will reach out to contact those with preliminary approvals. The online loans usually come with fast approvals. In addition to immediate decisions, the loan deposits come just as quickly. Same-business-day funding may be possible depending upon when the applicant submits the loan application.
Benefits of a Line of Credit Loan
The approval of money available for borrowing at any time would be among the top benefits of this online loan. Instead of seeking out a loan approval each time a need for funds arises, the borrower takes a draw on the line of credit. The minimum amount for a draw is $50. Once the loan arrives in a checking account, the borrower may withdraw it from his/her back in the standard manner.
The other benefit involves how the online loan provides a solution to whatever financial trouble may arise. The expedience of accessing a line of credit could cut down on stress a financially strapped borrower may feel.
How Lines of Credit Differ from Other Loans
A line of credit loan follows many of the same processes as other loans. The basic concept of borrowing and repaying doesn’t change. However, the structure and terms vary among the different loan types.
Unsecured line of credit loans don’t require any collateral. A home equity line of credit would be an example of a secured loan as the lender places a lien on a home until the debt is paid. Smaller scale secured loans require putting up personal property such as a car for collateral to receive a title loan. A payday loan, as the name implies, work as advances on future weekly salaries.
Terms and Repayment
A line of credit loan comes with terms and conditions. An established interest rate would be among those terms and conditions. The borrower will pay back the principle of the loan along with interest. Interest rates vary from borrower to borrower based on individual factors. Online loans may come with added fees depending on the specific terms.
Borrowers must pay a minimum amount per month on the money drawn. Failure to pay the minimum amount leads to paying additional interest, penalties, and fees.
